YouTube looks at subscriptions, more ad dollars

 @ibtimes
on December 15 2009 12:48 PM

YouTube is considering offering users the option to pay for subscriptions in a bid to encourage more media companies to license premium TV shows and movies to the popular online video site, a senior executive said.

YouTube, which is owned by Internet search giant Google, is already known to have held talks with several major movie studios about renting movies.

Google's vice president of content partnerships, David Eun, said in an interview that some full-length shows would not be available to YouTube under its current advertising model.

We're making some interesting bets on long-form content; not all content is accessible to us with the advertising model, Eun told Reuters, who said content partners will be able to choose what works best for them.

YouTube is keen to bulk up its licensing of full-length programs alongside the popular short clips uploaded by users that currently dominate the site.

But Hollywood studios and TV companies are reluctant to cannibalize revenue streams, such as from cable TV and DVD sales, by offering premium programs for free viewing on the Web -- even under an advertising revenue-share model.

Some of the options being considered by YouTube include variations of monthly subscription models such as those seen with cable TV providers.

Another option is a movie rental model similar to Apple Inc's iTunes or Amazon.com. YouTube has held talks about rentals with Lions Gate Entertainment, Sony Pictures, and Warner Bros,

Though YouTube is easily the most visited video site in the United States with more than 125 million users a month, many analysts see rival Hulu, which carries full length shows, as the future of the Web video business.

Hulu, owned by NBC Universal, News Corp, and Walt Disney, has rapidly become the No. 2 video site in the United States and has sold out on key ad inventory.

Eun insisted that advertising revenue would continue to be YouTube's mainstay and said that its content partners would start earning meaningful ad dollars in 2010. If we just continued to focus on our advertising model that would be enough opportunity to create meaningful revenue, said Eun.

The biggest opportunity today is advertising and we've just begun to scratch the surface, he said ahead of a presentation to analysts on Tuesday.

YouTube has short-form videos from a range of partners including CNN and TNT, ESPN and ABC; and full length-programs from partners including the UK's Channel 4 and Channel 5.

VEVO

YouTube is also backing an advertising-driven business in partnership with the music industry for a new site called Vevo which launched earlier this month.

Late last year the Warner Music Group and YouTube fell out over fees, leading to videos from artists like Madonna and Red Hot Chili Peppers being yanked from the site. The two sides came to an agreement in September. However Warner Music has yet to join Vevo, which is backed by Vivendi's Universal Music Group, Sony Music and music from EMI.

YouTube had previously been required to pay upfront licensing fees in the tens of millions of dollars to secure rights to carry the videos, according to people familiar with the talks. The new Vevo partnership is purely an advertising revenue share, according to Eun.

He said of the previous YouTube relationship with the music business: Our interests weren't aligned. There wasn't as much downside for the labels but there also wasn't as much upside for them.

(Reporting by Yinka Adegoke)

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